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BUSINESS MANAGEMENT CHAPTER 4 In this section: Ethics are a set of moral principles or values that govern behavior. This section discusses: • The Importance of Ethics • Codes of Ethics • Behaving Ethically • Laws Relating to Ethics and Business • Ethical Standards and Culture Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 What You’ll Learn: • Why business ethics are important. • What ethical codes should include. • How businesses solve ethical dilemmas. • What laws relate to ethics in business. Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Why It’s Important To succeed as a manager, you will need to understand the ethical issues that influence businesses. Ethics – a set of moral principles or values that govern behavior •Making decisions based on what they believe is right and wrong Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Code of Ethics Some businesses use a code of ethics which a document that outlines the principles of conduct to be used in making decisions within the organization. Some of the areas they cover are: • Adherence to the law. • Health and safety in the workplace. • Conflicts of interest. • Selling and marketing practices. Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Code of Ethics continued • Financial reporting • Pricing, billing, and contracting • Acquiring and using information about competitors • Protection of the environment Merely establishing a code of ethics does not prevent unethical behavior • If not enforced, they can do more harm than good Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Behaving Honestly Means: • not engaging in employee theft – includes: •embezzling money, stealing supplies or inventory from their employers •Not accepting bribes or submitting false expense accounts • not lying about hours worked •Showing up for work •If working from home, accurately report how long they worked • not falsifying records – this can cause a lot of damage to a Copyright © Glencoe/McGraw-Hill company’s reputation BUSINESS MANAGEMENT CHAPTER 4 • Sarbanes-Oxley Act of 2002 – contains important rules affecting the reporting and corporate governance of public companies and their directors and officers Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Solving Ethical Dilemmas • • • Have you defined the problem accurately? How would you define the problem if you stood on the other side of the fence? Whom could your decision or action injure? Can you discuss the problem with the affected parties before you make your decision? Cont. Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Solving Ethical Dilemmas cont. • Are you confident that your position will be as valid over a long period of time as it seems now? • Could you disclose without qualm your decision or action to your boss, your CEO, the board of directors, your family, and society as a whole? Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Identifying Acceptable Business Interactions • Normal interactions include taking clients to lunch or inviting them to play golf. • Questionable interactions include sending a client a very expensive gift. • Illegal interactions include taking or paying bribes. Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Laws relating to ethics in business address: • Competitive behavior • Consumer protection • Environmental protection Fig 2-1 Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Competitive Behavior • The Sherman Act (1890) – makes it illegal for companies to monopolize trade – mergers could be prohibited if it will create too large of a company that will control the market • The Clayton Act (1914) – makes it illegal to charge different prices to different wholesale customers – also bans requiring a customer to purchase a 2nd good • The Wheeler-Lea Act (1938) – bans unfair or deceptive acts or practices, including false advertising Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Consumer Protection • The Federal Food, Drug, and Cosmetic Act (1938) – bans the sale of impure, improperly label, falsely guaranteed and unhealthful foods, drugs and cosmetics • The Consumer Product Safety Commission (1972) – establishes safety standards on consumer products • Truth in Lending Act (1968) – creditors are required to let consumers know how much they are paying in finance charges and interest Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Environmental Protection • The National Environmental Policy (1969) – created the EPA whose mission is to protect human health and safeguard the air, water and land • The Clean Air Act (1970) – regulates air emissions – sets maximum air pollution standards, deals with problems of acid rain, ozone depletion and toxic substances in the air • The Clean Water Act (1976) – gives the EPA the authority to set standards on the type and quantity of pollutants that industries can put into bodies of water. Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Gift giving – customs differ around the world • In some cultures, gifts are expected – failure to present them is considered an insult Intellectual property – refers to ownership of ideas, such as inventions, books, movies, and computer programs • Only the owners of the intellectual property will profit from their work • Guaranteed through patents, trademarks, and copyright laws Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Laws regarding intellectual property differ in other countries • Ex: China and India – laws are not enforced – as a result, Chinese companies copy and sell foreign computer programs Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 • Social Responsibility – the obligation that individuals or businesses have to help solve social problems Evolved through 3 distinct schools of thought • Profit maximization, trusteeship mgmt, and social involvement Profit Maximization – dealing with social problems was not considered a legitimate business activity – earning money was the only concern Trusteeship Mgmt. – recognized that owners of businesses had obligations to do more than just earn profits Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 • Social involvement – 1960’s – many believed that corporations should use their influence and financial resources to address social problems that affect stakeholders Stakeholders – include a company's employees, customers, suppliers and the community • Example – commitment to the increased diversity Copyright © Glencoe/McGraw-Hill BUSINESS MANAGEMENT CHAPTER 4 Measuring Social Responsibility • Social Audit – a review of a business's social responsiveness Philanthropy – efforts to improve human welfare – contributing time and money to charitable, cultural and civic organizations • Paid time off to donate blood, participate in charitable activities, etc Environmental Awareness – limiting the damage their operations cause to the environment – creating processes that are as environmentally friendly as possible Sensitivity to Diversity and Quality of Work Life – adopting policies that contribute to the quality of live for their workers • Example – flex-time, on-site daycare Copyright © Glencoe/McGraw-Hill